Finance Bill 2025: Built Environment

A number of measures were announced in Budget 2026 designed to tackle challenges in meeting housing needs. The provisions to implement these measures are contained in Finance Bill 2025. Our Tax team considers the key measures for those in the Built Environment sector.

Reduced 9% VAT rate on apartment sales

The VAT rate applying to the sale of new apartments has been reduced from 13.5% to 9% effective from 8 October 2025. This reduction is due to last until 31 December 2030.

Based on the initial legislative provisions introduced to effect this change, the reduced rate of VAT only applies to the sale of apartments, and it appears not to extend to the supply of construction services related to apartment development. This caused uncertainty as to the circumstances in which the reduced rate would apply in practice, given that the sale of apartments usually involves the provision of building services.

The Minister for Finance has now indicated that he is looking at introducing potential revisions to the legislation such that the scope of the reduced rate will include the sale of the site and construction services for qualifying new apartment developments, including student accommodation. The expectation is that these revisions will broaden the scope of the VAT rate reduction to cover the common scenarios in which new apartments are sold in practice. Further details on this are expected to become available shortly when the amendments to the Finance Bill are published.

Clients should review their commercial and contracting arrangements to understand whether the reduction will apply in their circumstances. They should also review the wording in existing contracts to determine the impact, if any, on the price to be paid and whether the developer or the purchaser will be the party benefitting from any reduction.

Residential Development Stamp Duty Refund Scheme

The scheme provides for a partial repayment of the stamp duty paid on the acquisition of land where the land is subsequently developed for residential purposes. However, the partial repayment is subject to a number of conditions.

The Finance Bill introduces a number of proposed amendments to the scheme, including the following key changes:

• Extending the scheme to 31 December 2030, being the latest date by which construction operations must commence.
• Extending the time limits from 30 months to 36 months, from site acquisition to commencement of construction and from commencement to completion, for large-scale residential developments (LRDs) as defined in the Planning and Development Acts.
• Allowing for a full repayment of stamp duty to be claimed for a multi-phase development once the first phase commences. The last phase must be completed within 30 months of the date of the commencement notice related to that phase to avoid a clawback. This timeline is 36 months in the case of LRDs.

The extension of timelines is helpful in bringing the scheme more into line with current planning and development practices. However, we would have welcomed changes to certain conditions which present challenges for clients claiming the relief in practice. These include changes to the minimum footprint and gross floor space tests for multi-dwelling developments. Broadly, these tests require:

• At least 75% of the total surface area of the land must be occupied by dwelling units, known as the footprint test, or
• For the gross floor space of the dwelling units to amount to at least 75% of the total surface area of the land, known as the gross floor space test.

Residential Zoned Land Tax

Residential Zoned Land Tax (RZLT) is designed to encourage residential development of appropriately zoned and serviced land. It is a 3% annual tax applied on the market value of the land in scope, with certain exclusions.

The Finance Bill proposes a number of changes including providing landowners with a further opportunity in 2026 to seek a change in zoning of land, and, in certain circumstances, being exempted from RZLT for 2026 on foot of these submissions.

The Bill also proposes an exemption from RZLT during An Coimisiún Pleanála proceedings brought by a third party regarding a grant of planning permission for a relevant site. The exemption will apply from the grant of planning permission to the date the appeal is resolved. These changes helpfully address legitimate delays in the development of zoned land and prevent unfair penalisation of landowners as a result of these delays.

Cost rental income exemption

A new corporation tax exemption is introduced in the Bill. It applies to rental income arising from properties designated as cost rental dwellings by the Minister for Housing, Local Government and Heritage from 8 October 2025 onwards. Income arising from properties that were designated as cost rental dwellings before that date will not qualify for the exemption.

The exemption requires that certain reliefs relating to the relevant units, such as rental losses and capital allowances, will be disregarded.

A person in receipt of rental income from cost rental units will still be required to file an annual corporation tax return. The return will need to include details on the number of qualifying rental units, as well as the related rental income and profits earned from the units.

Where the designation of a dwelling as cost rental is revoked by the Minister, the exemption will not apply to profits or gains arising on or after the date of any revocation.

It is hoped that this measure will make the provision of cost rental homes more financially attractive and viable for investors in the market.

Enhanced deduction for eligible construction expenditure

An enhanced corporation tax deduction is being introduced for certain apartment construction costs. The measure provides for a total deduction of 125% of the actual qualifying costs, up to a maximum additional deduction of €50,000 per apartment unit. As a result, a potential net benefit of up to €6,250 per apartment may be available.

The deduction will apply to eligible expenditure incurred on the construction of a qualifying apartment block. The apartment block must be a multi-storey building principally comprising 10 or more new apartments. The deduction will also apply on the qualifying refurbishment of non-residential buildings into a qualifying apartment block.

For the purposes of this provision, an apartment means a separate and self-contained dwelling that has exclusive use of its own sleeping, bathroom and cooking facilities. In addition, access to the dwelling must be grouped or in common with other separate and self-contained dwellings, other than ground floor apartments.

The deduction can be claimed provided a certificate of completion has been lodged with the relevant local authority. However, expenditure can be apportioned between completed and not completed developments. Also, a commencement notice must be lodged for qualifying completed developments, on or after 8 October 2025 and before 31 December 2030.

This measure is designed to encourage the supply of housing, but its scope appears somewhat limited based on the current definition of an apartment which may exclude student accommodation and co-living spaces. Therefore, further refinements to this legislation may be required to achieve its objective.

End of the property letting “Waiver of Exemption” regime

The Bill confirms that the long-standing waiver of exemption regime for property lettings will be brought to an end when the Finance Act 2025 is enacted.

Lettings that were taxable solely because of a waiver will become VAT-exempt. Landlords relying on the waiver of exemption should consider the impact of the cancellation on their VAT recovery position.

For further detail on this change, read Indirect Taxes.

Other Finance Bill 2025 insights

The content of this article is provided for information purposes only and does not constitute legal or other advice.